1. You have three (3) hours to complete this exam.

2. This is an open book exam. You may use any written materials you wish.

3. The exam consists of 50 multiple-choice questions and one essay question. You may allocate your time as you please.

4. The multiple choice section constitutes 2/3 of the examination. You should try to complete this part in two hours. Correct multiple-choice answers are to be marked on the ParScore answer sheet form provided using pen or pencil and following the instructions on that form. If you change your answer, place a X through the wrong answer and mark the correct answer. A machine will score the exam and any ambiguities will be counted as a wrong answer. If two answers are true, you should select only the best answer.

5. If you have comments on any questions you want me to read, write those comments directly next to the questions themselves, and indicate on the first page of the question booklet what their numbers are. I won’t pay attention to any written notes inside the exam book except those listed there. Don’t try to make each question into a little essay just to get some extra credit points, because a wrong comment can also make a correct answer wrong.

6. Write your exam number on your exam envelope and at the top of this page, and the top of each page of questions, each blue book and on your ParScore answer form. Do not use your name, student ID number or Social Security Number on any exam materials.

7. At the conclusion of the exam, return all exam materials to the exam envelope and submit it to the proctor. Do not seal the envelope. Students who do not return all exam materials at the end of the exam will not be graded.

PART II

This essay question constitutes 1/3 of the exam. It consists of one (1) question divided into three parts. Answer all parts. Read the facts carefully. Answers based on incorrect facts are treated as incorrect answers. If you think that important facts are missing or ambiguously stated, make reasonable and explicit assumptions about them, but don’t make any assumptions that would make the entire problem vanish. Abbreviate where appropriate. Write legibly on every other line and only one side of each page only. I won’t read illegible answers.

I suggest you look at all three parts before you start your answer in order to locate the points you want to make in the right part and not have to repeat yourself more than necessary.

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Laura’s lease with Tim provides:

“1. Landlord hereby rents to tenant a store in her shopping center for a period of 5 years, from February 1, 2000 to February 1, 2005.

2. Rent is $24,000 per year, payable $2000 per month.

3. Tenant may use the premises only for purposes of selling cameras and related photographic equipment.

4.Tenant agrees to participate with all other tenants in the shopping center in the center’s monthly parking lot sale held on the first Saturday of each month, and to set up a stand in the parking spaces directly outside his store for the sale of selected items at a discount. This is very important to both landlord and to the other tenants.

5. Tenant is also given permission to use location X3 in the Shed at the north end of the center for storage purposes, for so long as this lease is in effect,.

6. Tenant has an option to renew this lease for an additional 5 year term, at 10% higher rent; in order to exercise this option, tenant must give landlord notice of an intent to renew at least one year in advance, i.e. prior to February 1, 2004.”

There are no other clauses in the lease that matter for this problem.

Tim entered and ran a camera store in the premises thereafter. In June 2002, Tim sold his business to Asher and assigned his lease to him. In September 2003, Asher decided to go back to school, and rented the business and sublet the premises to Stan for the period from June 2003 to June 2004. Asher also gave Stan the right to buy the business and take over the remaining balance of the lease if Asher later decided to stay in school rather than return to the business.

While doing business there, Stan realized that photography had become so electronic that he needed to start selling more computer related equipment; he then soon discovered that computer sales were producing substantial income, and he expanded that line so much that there were more computers in the store than there were cameras.

Stan also determined that the monthly parking lot sales produced no business for him, and stopped participating in them.

Because Asher had indicated to Stan that he would probably not be returning, Stan decided to exercise the renewal option, and sent a properly worded notice of renewal to Laura in January 2004.

This was the first time Laura learned of the transfers to Asher and Stan. Over the years rental values have increased so much, that a renewal of the lease at only a 10% higher rent will cause Laura to lose a lot of money. She has come to you for advice about the renewal and some other matters.

1. Several merchants in the center have complained to Laura about Stan. Nerd, who has been leasing the adjacent computer store long before the lease to Tim says that Stan’s computer sales are hurting his business, and since Nerd’s lease gives him the exclusive right to sell computers in the center, he wants Stan stopped. Claire, who has recently rented the adjacent store on the other side to sell clothing is upset about Stan’s nonparticipation in the parking lot sales because his absence on those days leaves a big empty space in the parking lot and many shoppers do not bother to cross over to look at Claire’s merchandise.

Laura would prefer that the merchants themselves sue Stan, and would be glad to finance their lawsuits, if you think they can succeed. Can they?

2. Better yet, can Laura use those complaints as a way of terminating Stan’s interest, or at least refusing to let him renew? Or instead, can she refuse to permit Stan to renew on the ground that she never consented to the transfers to Asher or to Stan? Should she seek to get evidence showing that one or both of them were bad credit risks and would not have been acceptable had she been asked? If this wrongful transfer argument does not work, is there any other basis for Laura refusing to honor Stan’s exercise of the renewal option.

3. It also turns out that when Tim was the tenant, he stored a lot of his personal belongings in the storage shed and has never emptied them out. Can Laura clear that stuff out? And if Stan is able to renew the lease, can Laura save some money by refusing to let him use that space and renting it out herself to someone else?

END OF EXAM